Which Is Better for NRIs: NRE or NRO Account?

I'd look at the decision from four angles rather than asking which account is better:

FeatureNRE AccountNRO AccountMain purposeOverseas income/fundsIndian income/fundsCurrencyIndian rupeesIndian rupeesIndian-source incomeGenerally not the primary purposeCommonly usedInterest taxationGenerally tax-exempt in India, subject to conditionsGenerally taxableRepatriationGenerally freely repatriableSubject to applicable rules/limitsJoint accountSpecific NRI/joint-holder rules applyWider permitted arrangementsTypical useOverseas earnings and savings in IndiaRent, pension, dividends and other Indian receipts

The exact rules depend on the type of transaction and your residential status under FEMA.

For someone with both foreign earnings and Indian income, having both NRE and NRO accounts can be more practical than trying to use one account for everything.

I maintain both because they solve different problems.

My NRE account is mainly for money I earn outside India. I can transfer foreign earnings into it and use the account for expenses in India.

My NRO account is where I keep Indian-source income such as rent, dividends and certain other receipts.

This separation also makes tax and documentation easier because I can identify which money originated overseas and which came from India.

One thing I would not do is assume that every type of Indian income can simply be credited to an NRE account. Banks have specific rules for what can be credited to NRE accounts, and Indian-source income often needs to be handled through an NRO account.

Also, NRO doesn't mean the money can never leave India. There are permitted remittance routes for NRO balances, subject to the applicable RBI rules and tax/documentation requirements.

I think the easiest way to understand the difference is to look at where the money comes from.

An NRE account is generally designed for an NRI's overseas earnings brought into India. An NRO account is generally used for legitimate rupee transactions and income arising in India.

For example, if I transfer part of my foreign salary to India, I use the NRE side for that money. If I receive rent from an Indian property, that income would normally go through my NRO account.

There is also an important tax difference. Interest earned on an NRE account is generally exempt from Indian income tax, subject to the applicable conditions, while NRO interest is generally taxable in India.

Repatriation is another major distinction. NRE funds are generally freely repatriable, subject to the applicable rules. NRO balances have more restrictions, although eligible amounts can be remitted abroad subject to the prescribed conditions and limits.

So I wouldn't really call one account universally better. They are designed for different types of money.